Some of Reliance's major retailing units still making losses

Retail biz sees 20% jump in same store sales, other retailers struggle

While Mukesh Ambani’s Reliance Retail showed a jump of 25 per cent in consolidated revenue in 2011-12, some of his other major retailing units are still posting losses, according to parent company Reliance Industries Ltd (RIL)’s 2011-2012 annual report.

Reliance Retail, set up by RIL six years ago, runs 1,300 stores. It made Rs 7,599 crore in revenue in 2011-12, but didn’t disclose consolidated net profit. Reliance Fresh Ltd posted a loss of Rs 273.8 crore on a revenue of Rs 3,860.4 crore. Reliancedigital Retail posted a loss of Rs 55.1 crore on a revenue of Rs 1,234 crore.

Reliance Brands, which has agreements with global brands such as Diesel, posted a loss of Rs 18.7 crore on a turnover of Rs 30.9 crore. Reliance Trends, which runs fashion stores, incurred a loss of Rs 11.35 crore on a turnover of Rs 489 crore. However, some of RIL’s speciality retail units have reached break-even or are nearing the point.

Reliance Gems & Jewels posted a profit after tax of Rs 0.84 crore on a revenue of Rs 475.5 crore. Reliance Footprint made a loss of Rs 0.6 crore on a revenue of Rs 155.4 crore.

“I think they are continuing to invest in back-end and technology. They are looking at the store level profitability and take few more years before breaking even at the entity level. The more stores become profitable, it will give them confidence to open more stores and achieve scale,” said Harminder Sahni, managing director at Wazir Advisors, a retail consultancy company.

“Reliance Retail witnessed strong growth in sales from existing stores and also added new stores. Despite challenging macro-economic conditions, most of the retail formats have delivered well over 20 per cent same store sales growth,” Reliance Industries said in its FY12 annual report.

Same store sales growth refers to growth coming from stores that are in the business for a year or more.

Even others, such as Aditya Birla Retail, Spencer’s Retail, are yet to see break-even at the entity level due to the continuous need for capital and long gestation period in the business, analysts say.

RIL’s value format comprising Reliance Fresh, Reliance Super, Reliance Mart, Delight and Autozone, consisted of 700 stores and contributed to dominant share of retail space and revenue from operations, it said.

“Same stores sales growth has been well above the growth declared by peer retailers in respective formats which indicates the robustness of the business model,” RIL added.

Pantaloon Retail, the country’s largest retailer posted same store sales growth of 3.2 per cent in value segment, 5.3 per cent in lifestyle segment and -3.2 per cent in home segment in December quarter of FY12. This was the lowest in the last two years.

“Overall, modern retail is yet to evolve in the country. For many, retail is yet to show break-even or stabilise. Apparel is showing early break-even because of high margins, but food, home and electronics are yet to see break-even for many,” said Rohan Kundnani, research analyst at SBICAP Securities.

Source : BS